Explanatory Notes

Energy Act 2008

2008 CHAPTER 32

494.Section 91 gives the Secretary of State an order-making power to both create new licensable activities under section 56A of the Electricity Act in relation to smart metering and to order that such new licensable activities shall cease to be licensable.

495.Subsection (2) provides that once activities become licensable, it will be an offence under section 4(1) of the Electricity Act to undertake them without a licence.

496.Subsection (3) sets out the scope of the licensing power and it may only be used to make licensable some or all of the activities connected with the provision, installation or operation of smart meters or related infrastructure or services. This could include, for example, the communications infrastructure for smart meters. Subsection (4) provides for the definition of “smart meters” to be set out in the order.

497.Subsection (5) makes provision for the order to include any necessary consequential, transitional, incidental or supplementary changes to primary legislation. This will enable the Secretary of State to add any new licensable activities to the current list of licensable activities in sections 4(1) and 6(1) of the Electricity Act and to make other amendments necessary to ensure that the new licences fit within the existing statutory framework. Such changes could include making a provision similar to section 33(2) of the Utilities Act 2000 to specify how any new standard conditions are to come into effect and/or be suspended; and amending section 33(1) of the Utilities Act so that any modified standard conditions are incorporated as standard conditions for licences of that type.

498.It is envisaged that the existing licensing framework and metering provisions in the Electricity Act will be applied to the new licensable activities including, for example, the procedures for modification of licences in sections 11 to 15 of the Electricity Act and the enforcement powers in sections 25 to 28 of the Electricity Act.

499.Subsection (5)(c) makes provision for the order to specify the standard conditions for any new licensable activities and to modify any existing standard conditions of licences.

500.Subsection (6) sets out a further non-inclusive list of the type of provisions which an order creating new licensable activities could contain. This includes provision restricting the geographic scope of licences which would, for example, facilitate national or regional licensing of smart metering activities (paragraphs (a) and (b)). The order could also confer functions of the Secretary of State or the Authority which would, for example, enable the conferral of the general licensing powers in section 7 of the Electricity Act on the Secretary of State so that he can determine the general licence conditions for any new licences created under these powers.

501.Subsection (7) makes provision for the Secretary of State to specify how long an order will remain in force which could limit the period during which any smart metering activities are licensable.

502.This section sets out the procedure with which the Secretary of State must comply when making an order under section 56FA(1).

503.Subsection (1) obliges the Secretary of State to consult the Authority and others as appropriate before making an order. By virtue of subsection (2), the power to make an order may not be exercised after the end of the period of 5 years beginning with the day on which section 56FA(1) comes into force. Section 56FA(1) comes into force on the passing of the Act (see section 110(1).

504.Subsection (3) provides that the affirmative procedure will apply to the order and it will not come into force unless approved by resolution of each House of Parliament (see also Schedule 5 amending section 106(2)(b) of the Electricity Act).

505.Subsection (4) gives the Secretary of State certain supplemental powers contained in section 60 of the Electricity Act when making any order under section 56FA(1). These include power to make provision for the determination of any questions of fact or law which may arise in giving effect to the order; prescribing time-limits within which things are to be done; and providing for matters under the order to be determined by specified persons and in accordance with specified procedures.

Section 56FC: Competitive tendering for licences for new licensable activities

506.This section gives the Secretary of State power to make regulations providing for the award of licences for new licensable activities by the Secretary of State or the Authority following a competitive tender procedure.

507.Subsection (3) sets out a non-inclusive list of the type of provisions which the regulation may include. The regulations may provide for the licences to be awarded by either the Secretary of State or the Authority (paragraph (a)); and may prescribe the necessary procedures for the tender process including publication of an invitation to tender and the conditions and any restrictions governing the making of applications (paragraphs (b) to (f)).

508.The regulations may also make provision concerning how the applications for licences are to be considered and determined. In particular, the regulations may authorise or require the Secretary of State or the Authority to have regard to an applicant’s suitability in relation to both gas and electricity activities when awarding a licence for new activities under the Gas Act (paragraphs (g) and (h)). The regulations may also confer functions on either the Secretary of State or the Authority in relation to the conduct of the tender (paragraph (i)).

509.Subsection (4) gives the Secretary of State power to make provision for the Secretary of State or the Authority to recover the costs of running the tender and to specify the consequences of any failure to make payment. This could, for example, give the Secretary of State power to require applicants to make payments to cover the costs of running the tender and ending their participation in the tender, and if necessary ending the tender exercise, in the event of any failure to comply. Subsection (6) states that any sums received by the Secretary of State or the Authority will be paid into the Consolidated Fund.

510.The regulations would be subject to the negative resolution procedure.

Gas and Electricity Meters

Summary and Background

511.This element of the Act transfers certain statutory functions relating to gas and electricity meters from the Gas and Electricity Markets Authority (the Authority) to the Secretary of State. These are legal metrology functions: they relate to the legal mechanisms for ensuring the accuracy of meters. The intention is that these functions will in future be performed by the National Weights and Measures Laboratory, an executive agency of the Department for Innovation, Universities and Skills.

512.Administrative responsibility for the technical metering functions and staff was transferred by a Memorandum of Understanding between the Authority and the NWML in 2006. The effect of the sections in this part of the Act is to complete the process of transferring these functions, by putting the existing administrative arrangements on a statutory footing.

513.The Authority regulates the gas and electricity markets in Great Britain. It is currently responsible for, amongst other things, gas and electricity meter approvals, certification (electricity) and stamping (gas) of new meters, the appointment of meter examiners and disputed meter accuracy testing.

514.The National Weights and Measures Laboratory (NWML) has a remit to ensure UK measurement is accurate, fair and legal. Acting on behalf of the Secretary of State, NWML currently has similar responsibilities to those which the Authority has in respect of gas and electricity meters for other measuring instruments, such as weighing machines, fuel pumps and water meters.

515.The Authority recovers the costs of performing its metrological functions through a licensing fee charged to network operators. The costs of performing these functions accounts for only a small part (under 2%) of the costs recovered in this way. It is proposed that when the Act transfers these functions to the Secretary of State, the costs incurred by the NWML in performing these functions should continue to be recovered as part of the licensing fee paid by network operators. An amendment to the relevant network operators’ licence conditions is therefore required in order to allow the Authority to pass the recovered funds to the NWML.

516.On completion of the transfer, the NWML will have responsibility for the standards and accuracy of gas and electricity meters. However, the Authority will retain its current responsibilities for smart and pre-payment metering policy will remain with the Authority, since they relate to the regulation and strategy for where, when and how these types of meter are used. The NWML will cover whether these types of meter measure accurately.

Commentary on Sections

517.Section 17 of the Gas Act 1986 (c. 44) sets out existing requirements on the use of gas meters and specifies that no meter shall be used for ascertaining the quantity of gas supplied unless it has been stamped by an appointed meter examiner. It further sets out the requirements and responsibilities of those meter examiners when examining and stamping meters, and provides for their remuneration. Section 17 also allows for regulations to be made by the Authority which relate to, amongst other things:

the prescribed standards meters must satisfy to be stamped, which include the performance requirements and routes to demonstrating conformity;

how and why meter approvals are revoked and the process that has to be followed if, for example, a design defect is found when meters are used in service; and

what happens when meter accuracy is disputed, including the circumstances when meters can be re-examined, the standards the meter should meet and the actions of the meter examiner following the re-examination.

518.Subsection (1) transfers to the Secretary of State the Authority’s functions under section 17 of the Gas Act 1986 (c. 44) and certain regulations relating to gas meters made under that section or under section 2(2) of the European Communities Act 1972 (“gas meter regulations”, as defined in subsection (5)). Subsection (2) ensures that references to the Authority, in section 17 of the 1986 Act or in gas meter regulations, will be read as references to the Secretary of State.

519.Subsections (3) and (4) will ensure that existing regulations made under section 17 of the 1986 Act, and other regulatory actions of the Authority in relation to meters, have effect as if made or done by the Secretary of State.

520.The combination of the changes set out insubsections (1) to (4) transfers the responsibility for the functions (including the power to make regulations) under section 17 to the Secretary of State. This formally transfers these responsibilities from the Authority to the NWML.

521.This section makes amendments to section 17 of the Gas Act 1986 (c.44) which are consequential on the transfer of functions from the Authority to the Secretary of State and relate to meter examiners.

522.Meter examiners are currently appointed by the Authority (in future, by the Secretary of State) under section 17. Examiners carry out much of the technical work done under that section and gas meter regulations. At present, most meter examiners are not civil servants.

523.By inserting a new subsection (7A) into section 17, subsection (4) makes provision for the Secretary of State to contribute towards the remuneration and pensions of non-civil service meter examiners and the maintenance of the equipment they use to perform their statutory functions. The new subsection provides clarity about payments to non-civil servant meter examiners (and, in some cases, their employers) in respect of the carrying out of statutory functions.

524.In transferring these legal metrology functions, it is necessary to ensure that the NWML can recover the costs of carrying out the transferred functions. To make this possible, licence payment conditions need to be modified to allow the Authority to recover funds from the licence fee and pass them to the NWML.

525.This section therefore gives the Secretary of State the power to modify gas transporter licence conditions under sections 7 and 8 of the Gas Act 1986 (c.44). Section 7 covers the requirements for licensing gas transporters, whilst section 8 covers standard conditions of such licences.

526.The effect of the section is that, following licence modifications made by the Secretary of State, the Authority will be able to recover from gas transporters costs incurred by the NWML in respect of functions in relation to gas meters, and pay those costs into the Consolidated Fund.

527.There are a number of checks and balances built into the section by virtue of subsections (4) to (9). They require the Secretary of State to consult licence holders, the Authority and any other persons as appropriate before making licence modifications. The Secretary of State must also publish the modifications, and ensure that the modifications made apply to all future licences.

528.Subsection (9) has the effect that modifications can only be made to licence conditions by the Secretary of State for six months after subsection (1) comes into force. The deadline is to provide certainty to the gas transporters that the power will only be used once for the purpose of allowing the Authority to recover funds and pass them onto NWML. Given the technical nature, it is not considered appropriate to detail the licence modification on the face of the Act.

529.Paragraph 14 of Schedule 5 makes amendments to the Utilities Act 2000 (c.27) which are consequential on the transfer of functions from the Authority to the Secretary of State.

530.Schedule 7 to the Electricity Act 1989 (c.29) describes, amongst other things, how electricity meters must be examined and certified. The Schedule further sets out requirements in relation to electricity meter examiners. The Schedule allows the Authority to make regulations which relate to, for example:

the requirements new meter designs must meet to be approved, which include the performance and routes to demonstrating conformity;

the requirements on manufacturers or repairers when submitting meters for certification which include meter performance, testing equipment and reporting; and

audit arrangements for manufacturers and repairers when seeking authorisation to self certify meters.

531.Subsection (1) transfers to the Secretary of State the Authority’s functions under Schedule 7 (other than paragraph 12) to the Electricity Act 1989 (c.29) and certain regulations relating to electricity meters made under that Schedule or under section 2(2) of the European Communities Act 1972 (“electricity meter regulations”, as defined in subsection (5)). Subsection (2) ensures that references to the Authority in Schedule 7 to the Electricity Act will be read as references to the Secretary of State. The omission of paragraph 12 to Schedule 7 from the transfer means that the Authority will continue to have responsibility for policy decisions about how and when pre-payment meters should be used.

532.Subsections (3) and (4) will ensure that existing regulations made at any time under Schedule 7 to the Electricity Act, and other regulatory actions of the Authority in relation to meters, have effect as if made or done by the Secretary of State.

533.This section makes amendments to Schedule 7 to the Electricity Act 1989 (c.29) which are consequential on the transfer of functions from the Authority to the Secretary of State.

534.Meter examiners are appointed by the Authority (in future, by the Secretary of State) under Schedule 7. Examiners carry out much of the technical work done under that Schedule and electricity meter regulations. At present, most meter examiners are not civil servants.

535.By inserting a new paragraph 4(2A) into Schedule 7, subsection (4)(b) makes provision for the Secretary of State to contribute towards the remuneration and pensions of non-civil service meter examiners and the maintenance of the equipment they use to perform their statutory functions. The new paragraph is to provide clarity about payments to non-civil servant meter examiners (and, in some cases, their employers) in respect of the carrying out of statutory functions.

536.Paragraph 12 of Schedule 7 allows the Authority to make regulations which permit sums owed to be recovered from customers using a pre-payment meter. This power will remain with the Authority. As such, policy decisions on how and when pre-payment meters should be used will continue to rest with the Authority, although the NWML will be responsible for the accuracy of pre-payment meters.

537.In transferring these legal metrology functions, it is necessary to ensure that the NWML can recover the costs of carrying out these transferred functions. To make this possible, licence payment conditions therefore need to be modified to allow the Authority to recover funds from the licence fee and pass them through the Consolidated Fund to the NWML.

539.It has the effect that following licence modifications, the Authority will be able to recover from electricity transmission and distribution operators costs incurred by the NWML in respect of functions in relation to electricity meters, and pay those costs into the Consolidated Fund.

540.There are a number of checks and balances built into the section by virtue of subsections (4) to (9). They require the Secretary of State to consult licence holders, the Authority and any other persons as appropriate before making licence modifications, which must be published, and ensure those modifications apply to all future licences.

541.Subsection (9) has the effect that modifications can only be made to licence conditions by the Secretary of State for 6 months after subsection (1) comes into force. The deadline is to provide certainty to the gas transporters that the power will only be used once for the purpose of allowing the Authority to recover funds and pass them onto NWML. Given the technical nature of the licence modification, it is not considered appropriate to set it out on the face of the Act.

542.Paragraph 13 of Schedule 5 makes amendments to the Utilities Act 2000 (c.27) which are consequential on the transfer of functions from the Authority to the Secretary of State.

Connection Offer Expenses

Summary and Background

543.New developments such as retail parks or housing projects require connections to the local electricity distribution network. When assessing the capital costs of such developments, developers need to know how much such a connection would cost and can request a network connection offer from the relevant Distribution Network Operator. The Distribution Network Operator is required, under the Electricity Act 1989, to provide a network connection offer following such a request. When providing the connection offer, the Distribution Network Operator will incur costs, for example, in determining the most appropriate point of connection to its network, designing the connection to the network and assessing what upstream changes need to be made to provide the load requested.

544.Until 2008, the practice was that Distribution Network Operators charged persons making connection requests up front for the costs incurred when providing network connection offers(7). However, following a complaint lodged with the Authority about this practice, legal advice confirmed that the Electricity Act 1989 only permitted Distribution Network Operators to recover these costs if an actual connection to the network was made. Since this issue came to light, the Authority has required Distribution Network Operators to change their charging methodologies to remove all elements of up front charging and bring them in line with the statutory arrangements. However, this means that because there are instances where connection offers are made but no connection is established, the Distribution Network Operators are unable to recoup all of their costs. Examples of such scenarios are, where developers make speculative requests about developments that do not then go forward, or where a third party connections provider requests an offer on a speculative basis. It is envisaged that without the ability to charge up front, that Distribution Network Operators may pass their assessment and design costs onto all users of the network, rather than those who cause these costs to be incurred.

545.This section will amend the Electricity Act 1989 to allow for up front charging in certain circumstances to allow Distribution Network Operators to recoup the costs of providing network connection offers.

Commentary on Sections

546.Section 16 of the Electricity Act 1989 states that a Distribution Network Operator is under a duty to make connections to the distribution system in specified circumstances. Section 16A of the Electricity Act 1989 states that when a third party requests a connection from an electricity distributor, the distributor is required to provide a network connection offer. Section 19 of the Electricity Act 1989 enables the electricity distributor to recover costs reasonably incurred in providing a network connection. The provision does not, however, entitle Distribution Network Operators to charge for work carried out, and expenses incurred, for network connection offers where a connection is not subsequently made.

547.Subsection (2) of section 98 addresses this problem by inserting new subsections (4A) to (4C) into section 16A of the Electricity Act 1989.

548.Subsection (4A) of the Electricity Act 1989 provides the Secretary of State with a power to make regulations entitling a Distribution Network Operator to request (to such extent as is reasonable in the circumstances) payment of expenses incurred when making network connection offers under section 16A(5) of the Electricity Act 1989. The power may only be exercised after consultation with the Authority.

549.Subsection (4B) states that the kind of expenses recoverable will be specified in regulations and, consistent with section 19(1) of the Electricity Act 1989, must have been reasonably incurred. The combined effect of subsections (4A) and (4B) is that a Distribution Network Operator may only request payment of his expenses if it is reasonable to do so.

550.Subsection (4C) provides scope for the regulations to specify circumstances under which an electricity distributor is not entitled to require payment and how expenses reasonably incurred are to be calculated.

Electricity Safety

Summary and Background

551.This element of the Act relates to electricity safety standards, which are aimed at protecting the general public and consumers from danger. The purpose is to allow for stronger sanctions where there is a breach of electricity safety standards and also to complete the implementation of a recommendation made by Philip Hampton in his March 2005 report, Reducing Administrative Burdens: Effective Inspection and Enforcement.

552.In October 2006, following the Hampton report, there was an administrative transfer of the responsibility for electricity safety standards, from the Secretary of State to the Health and Safety Executive (HSE) which provided for the HSE to exercise functions on the Secretary of State’s behalf. Electricity safety standards are set out in the Electricity Safety, Quality and Continuity Regulations 2002 (S.I. 2002/2665) (as amended) (made under the Electricity Act 1989 (c.29)), and include such things as the correct minimum height of overhead lines, appropriate controls on the use of underground cables, and earthing of metalwork.

553.This element of the Act formalises the administrative transfer and creates a consistent approach to the enforcement of safety regulation by giving overall responsibility to one regulatory body. This is in line with the wider Hampton recommendation for HSE to become the overall regulator for safety matters, to reduce the administrative burden of more than one regulator having similar functions.

554.The changes also allow HSE inspectors to use the sanctions available to them under the Health and Safety at Work etc. Act 1974, when enforcing electricity safety standards. These sanctions are considered by the government to better reflect the seriousness of a breach of electricity safety standards and are the same as sanctions available for a breach of other safety legislation enforced by the HSE.

555.The Electricity Safety, Quality and Continuity Regulations 2002 deal with issues of both electricity safety and security of supply. This element of the Act deals only with electricity safety. Responsibility for regulating security of supply will remain with the Secretary of State.

Commentary on Sections

556.Section 29 of the Electricity Act 1989 allows the Secretary of State to make regulations relating to electricity safety and supply. The regulations relating to electricity safety and security of electricity supply that are made under section 29, are the Electricity Safety, Quality and Continuity Regulations 2002 (as amended). Part 1 of the Health and Safety at Work etc. Act 1974 sets out provisions for the purpose of enabling the Health and Safety Executive (HSE) to secure the health, safety and welfare of persons.

557.This section makes section 29 of the Electricity Act 1989 (c.29), and regulations made under it, existing statutory provisions under Part 1 of the Health and Safety at Work etc. Act 1974 (c.37), so far as they relate to safety. This has the effect that section 29 and any associated Regulations will be considered as always having existed as statutory provisions of the Health and Safety at Work etc. Act 1974.

558.The effect of this section is to pass responsibility for electricity safety standards, including the inspection and enforcement of them, from the Secretary of State to the HSE. This therefore gives the HSE the power to amend those electricity safety standards should it see fit.

559.By making section 29 an existing statutory provision, HSE inspectors will be able to use existing statutory powers, available under the Health and Safety at Work etc. Act 1974 (c. 37), to prosecute for a breach of electricity safety standards. This provides an alternative, stronger sanction than any of those available under the Electricity Safety, Quality and Continuity Regulations 2002.

560.The sanctions available under the regulations are, on summary conviction, a fine not exceeding level 5 on the standard scale for each breach (currently £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland). Once section 29 is made an existing statutory provision, the maximum sanction would be a £20,000 fine, on summary conviction, or an unlimited fine, on conviction on indictment. This is in line with existing health and safety penalties.

561.The Health and Safety at Work etc. Act 1974 also allows for prosecution for non-compliance where an Improvement Notice under section 21 or a Prohibition Notice under section 22 has been issued. Where there has been non-compliance with an enforcement notice, inspectors could prosecute on indictment with an unlimited fine or 2 years imprisonment, or both.

562.Section 15 of the Health and Safety at Work etc. Act 1974 gives the Secretary of State the power to make health and safety regulations. Subsection (2) of this section sets out that regulations made under section 15 of the Health and Safety at Work etc. Act 1974 can remove or amend section 29 of the Electricity Act 1989, or any regulations made under it, or make new regulations that could have been made under section 29.

Renewable Heat Incentives

Summary and Background

563.Renewable heat is heat generated from renewable sources such as the sun, the heat in the ground and in the air, and biomass fuels such as wood from sustainable sources or biogas produced from biogenic waste. At present such heat meets only 0.6% of UK heat demand. The Renewable Energy Strategy (“RES”) consultation document published in June 2008 suggested that this may need to rise to around 14% in 2020 if the UK is to meet the projected overall renewable energy target of 15% for UK. Historically in the UK there has been little impetus for a renewable heat sector to emerge, due to the availability of large reserves of indigenous oil, coal and gas. The analysis which underpinned the RES consultation showed that without financial support very little renewable heat can be expected to come on line before 2020.

564.Renewable electricity generation has long been supported by existing financial support instruments in the UK, such as the Renewables Obligation. However, there have been no equivalent mechanisms to support renewable heat. This section of the Act gives the Secretary of State power to introduce a financial incentive mechanism for renewable heat – the Renewable Heat Incentive (“RHI”).

565.The purpose of the RHI is to stimulate a market for renewable heat by making support payments to the owners of renewable heat generation systems, proportionate to the amount of measured heat output delivered. It would essentially be a ‘feed-in-tariff’, though this is a shorthand way of describing it. In the UK heat is usually produced for immediate local use, and as there is no national heat network, it is not generally ‘fed in’ to a network and certainly not a nationwide one. The RHI will be funded via a levy on designated suppliers of fossil fuels supplied for the purpose of generating heat.

566.The RHI would be the only mechanism of its kind across Europe. A delivery framework and administrative and financial systems will need to be established to enable the RHI to be deployed. The enabling powers are broad enough to allow the detail of the scheme to be developed fully at a later stage following consultation. The provisions also allow flexibility to determine payment processes, levels of payments and to further identify who will be eligible to receive RHI payments.

Commentary on Sections

567.This section gives the Secretary of State power to make regulations to establish a financial support mechanism for renewable heat which will be known as the Renewable Heat Incentive (the “RHI”).

568.Subsection (1) gives powers to the Secretary of State to make regulations:

To establish a scheme to provide financial incentives to encourage and facilitate the development of renewable heat.

about the administrative and financial arrangements for a RHI scheme.

569.Subsection (2) provides further details about the scope of the Secretary of State’s regulation making power. It also contains provisions relating to the administration of the RHI concerning the making of payments and the collection of levies.

570.Subsection (2)(a) specifically enables the Secretary of State or the Authority to make payments (or require designated fossil fuel heat suppliers to make payments) to three listed categories of recipient in specified circumstances.

571.Subsection (2)(a)(i) provides that owners of plant used for the generation of renewable heat will be eligible to receive RHI payments. The section permits an owner to qualify for the RHI payment even in the event that they are not actually operating the plant themselves. This flexibility allows for third parties to operate in the renewable heat market: for example, a landlord who owns plant will be eligible for a payment even if the plant is actually operated by the tenant of the property. “Owner” is defined in subsection (3) to include a person who has acquired plant under a hire purchase agreement, a conditional sale agreement or any similar arrangement where title to the plant does not pass immediately.

572.Subsection (2)(a)(ii) provides that producers of biogas or biomethane will also be eligible to receive RHI payments. This provision therefore allows the RHI regulations to reward the production of renewable fuels as well as the generation of renewable heat itself. This would allow the Secretary of State to encourage and facilitate the development of the biogas/biomethane sectors

573.Subsection (2)(a)(iii) provides that producers of biofuels for the purpose of generating heat will be eligible to receive RHI payments.

574.Subsection (2)(b) provides that the regulations can make provision about the calculation of the RHI payments described in subsection 2(a). This is a broad and flexible provision allowing the Secretary of State to take account of different circumstances in setting the level of payments to various parties.

575.Subsection (2)(c) provides that the regulations can make provision about the circumstances in which payments might be recovered. For example, this would enable the Secretary of State or the Authority to make provision to recover funds that may have been paid out by mistake. .

576.Subsection (2)(d) provides that the regulations may make provision requiring that specified information from designated fossil fuel suppliers be provided to the Secretary of State or the Authority.

577.Subsection (2)(e) provides that the regulations can require designated fossil fuel suppliers to pay a levy to the Secretary of State or the Authority.

578.Subsection (2)(f) provides that the Secretary of State may make regulations to calculate the level of the levy.

579.Subsection (2)(g) provides that the regulations can allow payments to be made to fossil fuel suppliers in specified circumstances. For example, this could allow the Secretary of State or the Authority to redistribute funds collected via levies to fossil fuel suppliers, or to return funds to them.

580.Subsection (2)(h) provides that the regulations can make provisions about the enforcement of obligations under the RHI. These may include a power allowing the Secretary of State or the Authority to impose financial penalties, which could be used, for example, to ensure that levy payments are made in accordance with the regulations.

581.Subsection (2)(i) provides that the regulations may confer functions on the Secretary of State or the Authority (or both) relating to the establishment, administration or financing of the RHI scheme.

582.Subsection (3) sets out the definitions of specific terms referred to in this section of the Act and which are central to the RHI. In particular, the definitions provide as follows:

they specify that the administrative Authority for the RHI, will be the Gas and Electricity Markets Authority;

they explain what is meant by the terms: biogas, biofuel, and biomethane. Subsection (3) also provides a definition of one of the underlying constituent materials; biomass. ;

they provide a definition of “designated fossil fuel supplier”. These are the suppliers who, under the RHI may be required, amongst other things, to make payments to owners of plant used to generate renewable heat and pay a levy. The definition provides that they are a specified class of fossil fuel suppliers (as provided by regulations) and, in any other case, (i.e. if not provided by regulations) all fossil fuel suppliers.

they define “fossil fuel” by means of a list of fuels, including, for example, coal and petroleum products

they define “fossil fuel supplier” as a person who supplies fossil fuel to consumers for the purpose of generating heat. This will therefore exclude electricity suppliers or suppliers of renewable fuels. It will also exclude those who are supplying fossil fuels for purposes other than generating heat.

they define the `owner’ of plant (see above). As mentioned above, in some cases third parties, for example large energy companies. may wish to finance the deployment of such heat plant in customers’ properties;

“plant” is defined as including any equipment, apparatus or appliance.

the definition of “renewable generation of heat” provides that renewable heat is heat generated by means of a source of energy or technology listed at subsection (4).

603.Subsection (4) sets out the sources of energy and technologies referred to above in the definition of renewable generation of heat. These are: biomass, biofuels, fuel cells, water (including waves and tides), solar power, geothermal sources, heat from air, water or the ground and combined heat and power systems – but only if the system’s energy source is from a renewable energy source as defined by section 32M of the Electricity Act 1989 (c.29) (this has the effect of excluding combined heat and power systems which are powered by fossil fuels). None of the sources of energy or technology are limited by capacity, meaning that all scales of plant which generate renewable heat from such a source or technology may be eligible to receive a RHI payment.

604.Subsection (5)(a) allows for the list of energy sources as defined in subsection (4) to be modified by regulations. The Government’s intention is to modify the list as technological developments bring forward new technologies capable of making a contribution to the renewable heat sector. In this Act, by virtue of section 106, the power to modify includes the concepts of amending, adding to, revoking or repealing.

605.Subsection (5)(b) allows for the definitions of biogas and biomass as listed in subsection 3 to be modified by regulations.

606.Subsection (6) allows for regulations to specify that particular activities do or do not constitute the generation of heat for the purposes of defining the generation of heat from biofuels in subsection (2)(a)(iii) and the definition of “fossil fuel heat supplier” generally.

607.Subsection (7) requires the Secretary of State to secure the agreement of Scottish Ministers before making regulations in relation to Scotland which are within the legislative competence of the Scottish Parliament. It also requires the Secretary of State to consult Scottish Ministers on all other aspects of any regulations which apply to Scotland before they can be made.

607.Regulations made under the RHI power are subject to affirmative resolution by virtue of section 105 of the Act.

Nuclear Information

Summary and Background

583.This element of the Act and paragraph 21 of Schedule 5 propose minor legislative changes to ensure that the civil nuclear security regulator, the Office for Civil Nuclear Security (OCNS), is able to carry out its functions effectively. The proposed changes update the legislation to reflect recent changes in the nuclear sector. Those recent changes are:

The use of subcontracting following restructuring of the nuclear industry, made possible by the Energy Act 2004; and,

the administrative transfer in April 2007 of the OCNS to the Health and Safety Executive to sit alongside the civil nuclear safety regulator, the Nuclear Installations Inspectorate (NII).

584.The amendments in this element of the Act will ensure there are sufficiently serious sanctions available for those attempting to steal sensitive nuclear information. Minor and consequential amendments also re-establish the OCNS’s ability to gain access to Civil Nuclear Police Authority premises following its transfer from the Department for Business, Enterprise & Regulatory Reform to the Health and Safety Executive.

Commentary on Sections

585.This section relates to the securing of sensitive nuclear information pertaining to uranium enrichment. Previously, such information could only be kept on licensed nuclear sites which also held a permit to undertake the enrichment of uranium. Restructuring of the nuclear industry following the Energy Act 2004 means that sensitive nuclear information pertaining to uranium enrichment may now be taken, and stored, away from those licensed sites (for example, at research facilities).

586.To ensure the security of that sensitive nuclear information, there is already appropriate legislation in place which applies to anyone lawfully holding such information, and which prohibits disclosure of it by that person. However, the sanctions available against persons stealing or attempting to steal such information from premises which are not licensed to undertake uranium enrichment, are only those available for the offences of burglary or theft.

587.The Government does not feel these sanctions are strong enough. This is because theft and onward dissemination to others of information pertaining to uranium enrichment has implications for national security.

588.The overall effect of the section is to allow the offences and stronger sanctions that exist under the Official Secrets Acts to be used to prosecute persons stealing or attempting to steal sensitive nuclear information from designated premises. The section achieves this through a number of steps that are set out below.

589.The Anti-Terrorism, Crime and Security Act 2001 (c.24) makes provisions about terrorism and security. This section adds a new section, 80A, to the 2001 Act.

New section 80A Extension of the Official Secrets Acts to certain places

590.Subsection (1) of this new section provides that certain premises holding sensitive nuclear information, should be deemed as belonging to, or used for the purposes of, the Crown. This will allow the Secretary of State to make an order designating those premises holding uranium enrichment technology as “prohibited places” by virtue of section 3(c) of the Official Secrets Act 1911 (c.28). Subsection (1) is a necessary part of the section because only premises belonging to, or used for the purposes of, the Crown may be designated as “prohibited places” under section 3(c) of the Official Secrets Act 1911.

591.The overall effect of designating these premises as prohibited places is to extend the Official Secrets Acts’ offences and sanctions to persons gaining entry, or attempting to gain entry, to those premises.

592.The penalty for breach of the Official Secrets Act 1911 (c.28), by virtue of section 8(1) of the Official Secrets Act 1920 (c.75), is a custodial sentence of not less than 3 years and not more than 14 years. Section 1(2) of the Official Secrets Act 1911 sets out that in prosecuting persons under the Act, it is not necessary to prove that a person broke into that “prohibited place” for a purpose which would adversely affect the security interests of the State. Once orders are made by the Secretary of State designating certain premises as prohibited places, the protection afforded by section 1(2) will apply. This reflects the potential impact on national security.

593.The Energy Act 2004 (c.20) established the Civil Nuclear Constabulary to protect civil nuclear sites and nuclear materials. The Civil Nuclear Police Authority was established at the same time to ensure the Civil Nuclear Constabulary carries out its policing functions effectively and efficiently.

594.Paragraph 2 of Schedule 13 to the Energy Act 2004 (c.20) sets out the directions which the Secretary of State may give to the Civil Nuclear Police Authority. These include making sure the Civil Nuclear Constabulary completes tasks as it is required, and allowing authorised persons access to Civil Nuclear Police Authority premises. Paragraph 2(1)(h) of that Schedule provides that “officers of the Secretary of State’s department” are authorised to access Civil Nuclear Police Authority premises for the purposes of enabling them to monitor and inspect their activities.

595.Until the Office for Civil Nuclear Security was transferred to the Health and Safety Executive in April 2007, it was a division of the then Department of Trade and Industry and as such, its inspectors were “officers of the Secretary of State’s department”. This meant they had a statutory right to access Civil Nuclear Police Authority premises. This right of access is necessary to allow them to ensure the security of all licensed civil nuclear sites and sensitive nuclear information wherever it may be, including on Civil Nuclear Police Authority premises. However, when the regulator transferred to the Health and Safety Executive in April 2007, they ceased to be “officers of the Secretary of State’s department”. As a result, they no longer have an automatic right of access to Civil Nuclear Police Authority premises.

596.To rectify this, paragraph 21 of Schedule 5 substitutes “persons authorised by the Secretary of State” for “officers of the Secretary of State’s department”. The effect of the paragraph is that the civil nuclear security regulator can once again access Civil Nuclear Police Authority premises, since the Secretary of State will issue a letter specifically confirming that officers of the OCNS are authorised persons.

Application of General Duties

Section 102: Application of general duties to functions relating to licences

597.Section 92 provides that in exercising any of the powers under this Act to amend licences granted under the Electricity Act 1989 and Gas Act 1986, the Secretary of State is bound by the general duties set out in Part 1 of each of those Acts. It thus ensures consistency with the existing statutory framework for the electricity and gas sectors.

598.Subsections (2) and (4) specify that these general duties apply when the Secretary of State is exercising his modification powers under the following sections:

Sections 41 to 43, in relation to the introduction of a feed-in tariff for small scale low carbon electricity generation;

Sections 84 to 86, in relation to directing changes to electricity transmission system licences and codes with the aim of helping to ensure timely and efficient access for electricity generation projects, including renewables;

Sections 88 to 91, in relation to the introduction of smart meters; and

Sections 95 and 98 in relation to recovering from licensees the costs of meter accuracy services for which the Secretary of State is taking over responsibility from the Gas and Electricity Markets Authority.

7

The practice of levying upfront charges was reflected in each DNOs’ Connection Charging Methodology that are approved by the Authority.